Tag Archives: holiday

Is it a good time to buy real estate in Spain?

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After a continued drop in prices and sales from 2006, the Spanish real estate market has been on the up and up since 2016. The current international climate might even encourage us to invest in property in Spain.

The energy crisis, inflation and the instability caused by the Russia-Ukraine war are causing a contraction of the economy and an ongoing devaluation of the euro, and all indicators suggest that this trend will continue. But there is an upside to this gloomy news. Whenever currencies devalue, smart investors seek to put their savings in safe assets, and the safest place to invest has always been real estate.

Spanish people have inherited from their parents and grandparents the idea that you should always own you home, no matter your age or stage in life. This conservative mentality has traditionally had a huge impact on the real estate market, creating a higher demand than would be expected given the economic climate. Added to this are the hundreds of thousands of foreign nationals looking to retire or spend their summer holidays in Spain who jump at the chance to buy property here. Spain is also number two in Europe for people owning a second residence, at nearly 15%, this further straining the real estate market.

All this takes us back to where we started: buying property in Spain is a safe investment. The major crises of recent years should not let us forget that, for decades now, property has been the best and safest way to invest in Spain. And the current crisis has put prices back at a reasonable level after they hit rock bottom in 2016.

Carlos Prieto Cid – Your legal adviser in Spain

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Remote working from Spain

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Remote working is not a passing fad caused by the coronavirus pandemic. It’s a way of working that has so many advantages that it will become entrenched in society. I have clients who visit Spain on a regular basis for holidays or to enjoy their retirement. Now more and more of them are considering living here permanently, working and enjoying life by the beach at same time.

Over a year ago, before we’d even had a hint of the coming pandemic and the social changes it would bring, we published an article on our blog on the possibilities and legal risks of remote working. In this article, we concentrate more on the international aspects of this work situation. We’re specifically going to look at the legal problem arising when someone works remotely in one country, Spain, for example, when the recipient benefiting from their services is located in another country. Germany, for instance. This is an increasingly common scenario. There are even local councils and companies in Spanish tourist areas promoting the idea of “holidays all year round”, where the worker is offered the opportunity to enjoy their holiday paradise while meeting their work obligations during part of the day.

But when we provide our services remotely as an employee or a self-employed person and our habitual residence is in one country while the client or employer we are providing our services to is in another, what labour legislation and social security system are applicable? To answer these questions, which always depend on the timeframe, several agreements have been reached in the European Economic Area that essentially require workers to be able to demonstrate via an internationally valid document which national social security system is responsible for their situation and the payment of their contributions. When in this scenario, we must take into account the applicable situation and get expert advice to make sure that we are meeting our tax, labour and social security obligations at all times required by the legislation of the country in question. Cases can vary a lot, and you always need professional advice to make sure you are abiding by the law.

Carlos Prieto Cid – Your legal adviser in Spain

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Professional services for pensioners residing abroad

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When you stop working, it’s time to enjoy your pension. But what happens to your pension if you decide to retire abroad? To receive a pension in Spain as a foreign resident, you need to take into account a range of matters that can turn out to be quite complex.

Spanish pension laws are extremely complex, although this legislation is not applicable to Spanish residents receiving a foreign pension. In this case, you are covered by bilateral social security agreements. In Spain, the Social Security (“Seguridad Social”) takes care of social welfare matters.

One typical situation is migrating when you’re already receiving a pension in your home country. In this case, you need to know what to do to make sure you keep receiving your pension abroad. To start with, you need to submit a number of documents to the social welfare authority in your home country.

You may also need to demonstrate that you are still alive and entitled to receive the pension. Any hitch regarding this matter can result in a stoppage of the payments and can cause serious problems for you as an overseas pensioner.

Another complex situation entails when you have worked most of your life in your home country but now work abroad and plan to stay and live in this foreign country during your retirement. In this case, you need to calculate the most beneficial option according to the applicable international agreements for the periods worked in the two countries.

This situation can vary greatly and can give rise to very complex scenarios because of differences between the legislations of the different countries regarding the minimum retirement age, the minimum amount of years worked required, requirements regarding non-contributory pensions, etc. Ideally, you need to get professional advice when making decisions about such important matters regarding your working life.

Carlos Prieto Cid – Lawyer

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The risk in buying inherited real estate

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Buying a house is a big decision because it’s a big investment. You need to be aware of the consequences and clear about the risks.

Today we’re going to talk about a common scenario: inheriting the primary residence of a deceased parent, spouse or relative. People finding themselves in this scenario need to sign notarial documents to transfer the property by inheritance. They can also reduce the inheritance tax they owe if they state in these documents that they don’t have any intention to sell the property in the next five years. They may not have to pay any tax at all. This is something they are always relieved to hear when they visit the notary’s office. And they can still register the notarial document for accepting the inheritance in the Land Registry (a requirement in Spain) without any problem.

Time passes. These inheritors forget the statement they made so they could pay less or no tax when they accepted the inheritance. Then someone offers them a good price on the property. They decide to sell, and the buyer acquires the property, theoretically free of encumbrances. But this is not the case. Because of the inheritance, the property was subject to a charge recorded at the Land Registry. But everyone overlooked it. However, the Spanish tax authority, which can review tax declarations made when properties are transferred, won’t overlook it. If the tax authority decides that the wrong amount of tax was paid at the time of transfer, it can impose a new payment of the tax, with the property as security to cover any tax liabilities, regardless of who owns the property today. In the case that we spoke about above, the buyer could get a nasty surprise if the tax authority discovers that the conditions for the tax reduction or exemption taken advantage of when the property was transferred by inheritance were not subsequently met. Thus, tax becomes due on this property, and the new owner must pay it, even though they benefited in no way from the original tax break. This is why we always recommend seeking legal advice before signing any conveyancing agreement or preliminary agreement. You need a lawyer to check for any hidden problems that may come back to bite you. The case we talked about today is just one of the many traps that buyers can find they have fallen into when they sign agreements without seeking advice. There are many other scenarios that also entail great risk.

Carlos Prieto Cid – Lawyer

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Tourist rentals and homeowner associations

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We’ve written before about the administrative requirements for renting properties to holidaymakers: https://blog.tarracoiuris.com/en/?p=380
Today we look at the legal issues that can arise with homeowner associations.

As we stated in our previous post, the government has established social, economic and tax controls in the tourist rental market. It did this because holiday letting can affect housing prices, the make-up of districts and the good relations between neighbours. Politically, these are highly sensitive issues. Recently, there have even been very divisive campaigns by neighbourhood and social groups against tourism, a phenomenon referred to as “tourism-phobia” by some in the media. These groups say that the boom in holiday letting has caused social problems, especially in the historic centres of cities and in communities in tourist areas.

Thus, the government now requires various things if you want to rent a property to tourists. First, the property must have a special registration number. This number, issued by the Tourism Register of Catalonia (Registre de Turisme de Catalunya, RTC), starts with the prefix HUT, which basically stands for “property for tourist use” in Catalan. Second, you must register the property with the regional police so you can register the details of the people who stay overnight in your property. Lastly, you need to pay the Catalan tourist tax (the IEET tax) on an ongoing basis.

As well as having to comply with these administrative requirements, you also need to take into account whether the property you want to let out is affected by a homeowner association. If you have an apartment in a building with common areas or a house or duplex on an estate with common services (pool, sport facilities, etc.), you and your property may be affected by the decisions of a homeowner association on what your property may be used for. Homeowner associations are increasingly voting to prohibit certain uses of properties. This often includes prohibiting owners from renting their properties to holidaymakers.

What can you do to protect your property rights in such cases? You need to seek professional advice to analyse exactly what options you have. We would be more than happy to provide you with this advice. Please contact us if you find yourself in this situation or have any questions.

Carlos Prieto Cid – Lawyer

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The red tape involved in letting a holiday home in Catalonia

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Renting out a coastal property to holidaymakers in summer has become quite complicated, although most foreigners are unaware of the many obligations involved.

In recent years, the Catalan regulations on letting tourist accommodation has become particularly strict. The main political reason for this toughening up of the legislation is a cracking down on tax evasion as many letters of holiday accommodation do not declare their rental earnings in Spain (which is required by law, regardless of whether the owner of the property is a resident in Spain for tax purposes).

However, there is an even more compelling reason for the Catalan government to want to control access to the holiday accommodation market. On the coast and in the old parts of the larger cities, particularly Barcelona, tourist flats have become a social problem, owing to the not always civil behaviour of the holidaymakers (who change from week to week), and also an economic problem, owing to the unfair competition such accommodation represents to the hotel sector.

Before you can let your property to tourists, you must register it in the local council’s register of tourist accommodation. Not doing so makes you liable for some very stiff fines (even for just advertising the accommodation online without anyone actually coming to stay). To be listed in the register, you need to certify that the dwelling complies with certain conditions of habitability and energy efficiency. You also need to register the property with the tax authorities so the corresponding tourist tax (paid per night by each tourist) and income tax can be collected.

Registering a property as tourist accommodation can result in unexpected complications (which may even make it impossible to let the property). If you have a flat or house you want to let to tourists, we offer services to assist you in registering the property with the local council, drafting the letting agreements and ensuring compliance with all the official and tax obligations for total peace of mind.

Carlos Prieto Cid – Lawyer

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Under the new Entrepreneurs’ Law, a residence permit can be obtained by purchasing a property in Spain

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In enabling this, the Spanish government is attempting to reinvigorate the property market by attracting foreigners from outside the European Union with the granting of a residence permit for investing in Spain, which brings the added benefit of being able to move virtually freely around various member states under the Schengen Agreement.  

Here, too, there is a danger that an investor will view the purchase of a property as an opportunity to do business in Europe.  This can mean that they fail to check sufficiently thoroughly as to whether the purchase of the property is safe and reputable, as they want to take advantage of the opportunity to gain legal residency in Spain.  The risk is the same as for the tourist who wants to enjoy their holiday rather than attending meetings with lawyers.  In this case, too, the investment is a means, not an end, for just as the tourist sees the acquisition of a property as a means that secures them their holiday in Spain, the entrepreneur sees their opportunity to obtain a residence permit by purchasing a property, which then enables them to move freely around the Schengen area.  Both view getting adequate protection for their purchase as unnecessary.  If any problems subsequently arise, they find themselves compelled to find a lawyer to solve the problems arising from their failure to seek independent, professional advice.  However, by then it is often too late, and if there is a solution, it will involve much higher costs than if they had sought advice at the right time.  Well-advised investors can avoid making such mistakes.

Carlos Prieto Cid – Lawyer

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Purchasing property in Spain as an investor, not as a tourist

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Each year, many of the millions of tourists who spend their holiday in Spain decide to buy a property in their destination country.  However, when investing their savings in Spain, they often act whilst still in a holiday mood, and make major decisions without due care and attention.

In almost any language, the term ‘tourist’ leaves a slight aftertaste in the mouth.  Airlines offer their cheapest tickets under the heading ‘tourist class’, while in every country that survives on tourism – and Spain is no exception – tourists are seen as easy prey who are only in town for a short period of time and can easily be taken for a ride.  This image of the typical tourist, whom it is easy to hoodwink and escape unpunished, is largely down to their poor language skills and lack of knowledge of the local customs, but also because tourists are on holiday, of course, and want to enjoy their short time away from home and are therefore relaxed and less vigilant.  As a result, they do not act with the same amount of care as they might in a similar situation at home.

Purchasing a property always involves a large outlay.  In many cases, sums are invested which represent many years of saving.  Such a decision should be given the appropriate degree of protection and made with as much information as possible on the potential legal and financial risks.  Sadly, as lawyers, every day we see how foreigners are conned when purchasing a property and lose their money as a result of failing to seek advice.  Often, people think they don’t need any advice, but then comes a rude awakening.  The cost of an independent consultation is minimal compared to the often hidden dangers when signing a contract of sale for a property; and such advice can only be independent if it has no connection with any other professionals involved in the sales contract.

Carlos Prieto Cid – Lawyer

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New campaign of the Tax Agency to demand the payment of income tax to non-residents

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Even if they are fiscally non-resident, owners of real estate in Spain must file a separate income tax return each year and pay the so-called income tax for non-residents (IRNR) for revenues earned from the property .

The Spanish state tax authorities have not been very demanding until now regarding the payment of income tax to fiscally non-resident property owners. Many homeowners are not aware of the existence of this tax liability and can not understand why they have to file a tax return and pay this tax in Spain, despite the fact that they are not getting any income. They come to Spain just to spend their holidays: they do not work, they do not receive interest income from cash deposits in the bank, they do not rent their property. However, the mere possession of a property in Spain, as in other European countries, is considered by the law as income, even if the property is not rented. State tax rules require that the owner gets benefit of his own real estate anyway, even though these objects are not leased. The only exceptions are the cases in which the property is one’s own domicile or if the property is devoted to economic activity. Both cases can never happen with non-residents.

There is another tax, the municipal tax on property ownership, the so-called IBI (Spanish Impuesto Sobre Bienes Inmuebles), the payment of which the local municipality requires to property owners each year, and which is calculated and declared by the administration itself. In contrast, in the case of the state income tax for non-residents – IRNR-, the tax inspection is not mandated to prepare tax returns for the non-residents, but it is the taxpayer himself who is required to provide an annual tax return, and calculate and pay the property taxes on its own initiative.

This month, many homeowners who spend their holidays in their own apartments or private homes in Spain, received a letter from the Spanish tax authorities, reminding of the existence of the tax on the income of non-residents and the obligationy of paying it. Earlier, the state tax agency was very generous regarding this tax. Now, however, given that the economic situation is so bad, it appears that IRS has become stricter, requiring submission of tax returns and payment of this tax by all non-residents who own property in Spain.

Carlos Prieto Cid – Lawyer

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If I change my residence to Spain, what should I do with my car?

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If you are used to walk around the urbanizations in the Spanish coast, you realize that there are plenty of cars with foreign number plates parked for months or even years at the entrance of the house of their owners. All these vehicles are in an irregular situation, which may cause a complaint and have as a result a significant administrative fine for smuggling.

The change of residence has very important consequences in daily life. One of them is the legal situation in which our car will be: a car registered in a foreign country can only circulate legally in Spain during several months. Beyond that deadline, we are required to register it in Spain, following the procedures provided for each case.

Due to the current economic situation the Spanish administration exhausts all possible ways to raise revenue. Nowadays we are detecting an unusual activity of the police inspection, chasing offenses with which the state previously was more tolerant. That’s why resident foreigners, who have maintained in Spain for years without any problems their old cars registered in their home country without worrying about legalizing them, are now very often facing heavy fines and administrative complaints because of this offense.

The vehicle legalization due to a change of residence is a very complicated process, in which different administrations are involved without any coordination between them. If our home country is not a member of the European Economic Community, as in the case of Switzerland or Russia, we must formalize import customs formalities before the car can be tested by the official stations of roadworthiness. In addition, if the vehicle was not marketed in the European Economic Community, we will not have the necessary certificate of conformity, and we will have to instruct an authorized inspector to report on its technical specifications. This requires high costs which, added to the administration fees and the necessary management costs, can make the legalization economically unviable, depending on the situation and the age of the vehicle. However, we can not forget that to unsubscribe a vehicle or to test its roadworthiness can only be made in the country of registration. That means that we should return to the country of origin with the vehicle, if we decide not to legalize it into Spain. In any case, if we are denounced, the fines or the risk to be prosecuted for smuggling can have a much higher cost.

Carlos Prieto Cid, Lawyer

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